The $70 million deal, announced at a news conference by the prince at his Kingdom Tower headquarters in Riyadh on Tuesday, deepens the burgeoning partnership between the two media moguls. Prince Alwaleed already holds a seven-percent stake in News Corp, whose stable includes 20th Century Fox, Fox News, the New York Post, the London Times and Sky TV.

Under the agreement, News Corp has an option to acquire a further 9.09-percent stake in Rotana. The option will run for 18 months after the deal is signed.

New Corp has been seeking to expand its presence in the growing Middle Eastern entertainment market for some time and has been considering a number of ventures in partnership with the prince's Kingdom Holding Company (KHC). Five months ago it was reported in the Wall Street Journal that the Murdoch group was looking at a 20-percent stake in Rotana.

Prince Alwaleed told Arab News that the deal was not cash-driven. It went "way beyond finance." Rotana, which owns the largest record label in the Arab world and 11 television channels, was "fully financed" he said. The deal was about News Corp's confidence in Rotana and commitment to it. It will enable the media group to gain from News Corp's experience in movie production, television, the news media and technology. He spoke of its providing a "qualitative leap" not just for Rotana but for the Arab world.

The prince said that the deal would strengthen the existing relationship with News Corp — "building Rotana's presence across the region and expanding its reach to the Arab diaspora around the world."

In a prepared statement, Rupert Murdoch's son James, who heads News Corp's European and Asian arm, said that the newly acquired stake would help his company expand its presence in "a region with a young and growing population where GDP is set to outstrip that of more developed economies in the years ahead."

Prince Alwaleed also announced that shares in Rotana will be floated on the stock market. Advisers will be appointed within the next two months in order to prepare an initial public offering (IPO). Decisions still need to be made as to the number of shares to be issued, where they would be traded and what changes in business and management were required prior to an IPO, the prince said. The deal values Rotana at just over $770m.

Alwaleed also has significant stakes in a number of other media and entertainment corporations including LBC, Time Warner (owner of CNN, HBO and Fortune Magazine as well as Warner Bros and Time Magazine) and Euro Disney. KHC has a 29.9 percent stake in Saudi Research and Marketing Group, the parent company of Arab News.